Gun conundrum: Why is ammunition still in short supply?

Demand for bullets has surged, resulting in a shortage and skyrocketing prices. Some see a nefarious federal intent to take ammunition off the market. Others cite panic buying among gun owners. Where does the truth lie?

Store manager Mike Fiota shows a box of .223 ammunition at left and a box of 9 mm ammunition at right at Duke's Sport Shop in New Castle, Pa. on Friday, April 5, 2013.

Keith Srakocic/AP

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Atlanta

The joy many gun owners felt earlier this month when the Senate voted down new gun regulations has been tempered by a stark – and disappointing – truth: America is currently a country without enough bullets for sale.

It's not as if the nation's 27 ammunition manufacturers have closed up shop or are turning out fewer bullets than usual. But demand is outstripping supply, causing prices to spike and even some police departments to shift to air rifles for training exercises. And the shortage has not abated, although it's been more than four months since the mass shootings in Newtown, Conn., sparked a run on guns and ammunition, when it became clear Congress would take up gun control.

What some call the great American ammo shortage is a head-scratcher even for experts, so far defying economic laws of supply and demand. Three causes are generally cited, though it's difficult to tell precisely how much each is to blame. First is panic buying among the gun-loving public, something that's been seen before. Second is a staid industry that, having not anticipated a demand surge, does not have a big enough supply of black powder and primer to quickly and significantly boost production to meet the demand surge. Third, and most controversially, is suspicion in some quarters that the federal government itself has deliberately placed a huge order for ammunition in order to drain the supply and cause bullet prices to jump for private buyers.

That last one may sound as if it belongs in the annals of conspiracy theories, but many gun rights advocates and at least some members of Congress take it quite seriously. On Friday, two Republican lawmakers – Sen. Jim Inhofe and Rep. Frank Lucas, both of Oklahoma – introduced legislation that would require an audit of the effect of government bullet purchases on the broader market and would limit the US government's ammo stockpile to six months' supply, rather than the current two years' worth stored in federal armories.

“One way the Obama Administration is able to [curb Second Amendment rights] is by limiting what’s available in the market with federal agencies purchasing unnecessary stockpiles of ammunition,” said Senator Inhofe, sponsor of the proposed AMMO (Ammunition Management for More Obtainability) Act, in a statement.

A federal purchase that hogged 15 percent of America's total annual bullet production might indeed contribute to a shortage, but it's not that simple. For one, officials say DHS will actually buy more like 750 million bullets, though it is authorized to buy as many as 1.6 billion. For another, the contract is spread over five years – part of what DHS calls a "strategic sourcing" initiative to save money. Finally, the contract stipulation that bullet manufacturers must honor federal government ammo orders ahead of the public and local law enforcement, while rankling to gun rights activists, is par for the course, dating back to at least World War II.

In the end, the DHS budget calls for spending $37.2 million on bullets in fiscal 2013, compared with $36.5 million in 2012.

But critics – especially those who believe that the Obama administration is determined to discourage gun-ownership – are not assuaged, saying the DHS ammo purchase fits a pattern of this presidency: If you can’t run though your agenda legislatively, run through it anyway. Conservative talk-show host Michael Savage put it this way recently: “It’s a way to control the amount of [ammunition] that’s available on the commercial market at any time.”

“Once the government issued contracts for 1.6 billion rounds, even if it’s over five years, that’s a tremendous volume of shells coming off the market, and the market reacts to it,” says Mr. Dillard, of David’s Gun Room. “It’s very frustrating from everybody’s point when you have a government where, if they can’t take the guns, they say, ‘Hey, we’ll take the ammunition.’ It makes the gun a very expensive stick.”

In reaction, he adds, “People say, 'I better go get mine,’ and they go and buy everything in sight, so all of a sudden there isn’t anything.”

Congressmen chased that line of inquiry Thursday in hearings, where Rep. Darrell Issa (R) of California said the DHS ammo order “flies in the face of common sense” and appears as if the government is amassing ammunition.

DHS training officer Humberto Medina, in response, said he could "say categorically [that hoarding] was not a factor at all" in the purchases and that there is no effort to take ammunition off the market.

DHS says the “up to” order of 1.6 billion bullets is to secure at least 1,600 rounds a year for each federal law enforcement officer, largely for training purposes. In 2012, DHS bought 103 million rounds for 70,000 officers.

Rep. Jason Chaffetz of Utah (R) said that’s at least 1,000 rounds more than the average US soldier is provisioned per year.

Mr. Medina replied that DHS made the move to stockpile because of market volatility (i.e., price increases) and problems with the supply chain.

Most gun industry insiders agree that government purchases have played a cameo role in the ongoing bullet shortage, but they say private gun owners – and panic buying – are the chief reason for the upending of America’s ammo supply train. One sign of the ongoing buying binge: Total federal tax receipts on bullet sales (which are dedicated to funding state wildlife conservation efforts, courtesy of the 1937 Pittman-Robertson Act) jumped 47 percent from 2011 to 2012, to nearly $2 billion.

Moreover, there are more guns than ever in circulation, at 400 million, and a jump in the number of gun owners to at least 70 million.

“A lot of this depends on publicity,” says Andrew Molchan, director of the 1,000-member National Association of Federally Licensed Firearms Dealers, based in Fort Lauderdale, Fla.. “If the news is full of terrorism and talk about gun control and people on TV speaking about controlling this and controlling that, sales go up. It’s kind of like if [CNN's] Piers Morgan got on TV and said, ‘Don’t buy pink toothbrushes,’ the next morning they’d sell 300,000 pink toothbrushes. There’s a hoarding instinct.”

Ammo that is especially in short supply includes the AR-15’s .223, as well as .38, .45, 9 mm, and .22 et cetera, says Mr. Molchan. Prices have shot up dramatically, with a single .22 round that used to sell for five cents now costing at least 50 cents.

“Popular deer-hunting rifles in Pennsylvania still are available. What isn't available is ammunition for those rifles,” Erie Times-News outdoors columnist Mike Bleech wrote earlier this year.

Meanwhile, bullet manufacturing in the US is dominated by “old-timers” hesitant to expand production capacity because they expect the ammo-buying wave to crest and then subside, says Molchan. The industry is working at about 87 percent capacity, he and other experts say, because it doesn't have enough black powder and primer on hand to sustain a ramped-up production schedule.

Kristi Hoffman, co-owner of Black Hills Ammunition in Rapid City, S.D., says this is the third time the company has been 18 months behind on its orders –the previous times being the 1993-94 debate over the assault weapons ban and the months after President Obama’s election in 2008.

So far, the company has been loath to hire more employers or to buy more equipment. “Do we have more [production] room? Yes, we have more room, but we’re not going to add more people than we have right now, because we don’t know when this is going to stop, and if it does stop within the next year we don’t want to be in a position to lay off personnel,” she says in a phone interview.

“We don’t like this kind of business,” Ms. Hoffman adds. “Don’t get me wrong, money and business is still good, but we prefer to have nice, steady growth instead of having spikes because of political and economic reasons.”

In the end, says Malchon, the ammo hoarding that is going on “is primarily private indivudals, rightly or wrongly. The survivalists, they’re the ones sitting there with probably 10 cases of ammunition." He adds, "It doesn’t make any sense, but does it make a lot of people feel better? The answer is yes, so what can you say?”